States Discuss Mortgage Investigations as Bank Talks Drag On

The group, which met in Washington, included New York Attorney General Eric Schneiderman, California’s Kamala Harris and Martha Coakley of Massachusetts, according to two of the people, who declined to be named because they weren’t authorized to speak about the meeting. Schneiderman, Harris and Coakley are each conducting separate investigations of bank practices. Photographer: Ben Hider/Getty Images

Jan. 13 (Bloomberg) -- About a dozen state attorneys
general met this week to discuss their mortgage investigations
and how they might work together as settlement talks with banks
over foreclosures drag on, three people familiar with the matter
said.

The group, which met in Washington, included New York
Attorney General Eric Schneiderman, California’s Kamala Harris
and Martha Coakley of Massachusetts, according to two of the
people, who declined to be named because they weren’t authorized
to speak about the meeting. Schneiderman, Harris and Coakley are
each conducting separate investigations of bank practices.

The meeting occurred as state and federal officials are
negotiating a settlement with the five largest mortgage
servicers, including Bank of America Corp. and JPMorgan Chase &
Co., that would set requirements for conducting foreclosures and
provide relief to homeowners.

Schneiderman, Harris and Coakley, along with Nevada
Attorney General Catherine Cortez Masto and Delaware’s Beau
Biden, have raised concerns about any deal that protects banks
from future investigations. Masto and Biden also attended the
Jan. 10 meeting, according to one of the people. The five states
aren’t among those negotiating directly with the banks.

“A number of likeminded AGs met together to discuss
current and ongoing investigations into the mortgage finance and
foreclosure industries in addition to prospective or future
investigations that may be fruitful,” Delaware Deputy Attorney
General Ian McConnel said in a phone interview. He declined to
comment further.

Massachusetts Lawsuit

Harris and Masto announced in December they were
collaborating in their mortgage and foreclosure investigations.
Schneiderman and Biden are also cooperating. In December,
Coakley sued Charlotte, North Carolina-based Bank of America,
New York-based JPMorgan, Citigroup Inc., Wells Fargo & Co. and
Ally Financial Inc., accusing them of conducting unlawful
foreclosures and deceiving homeowners.

More than 6 percent of Nevada housing units had at least
one foreclosure filing in 2011, giving it the nation’s highest
state foreclosure rate for the fifth consecutive year, according
to RealtyTrac, which tracks foreclosure activity.

Arizona had the second highest foreclosure rate, with one
in 24 housing units, and California ranked third at one in 31,
RealtyTrac said.

Enforcement Strategies

At the meeting in Washington, the attorneys general talked
about their own investigations and litigation as well as
different enforcement strategies and options, one of the people
said. They talked about the Massachusetts case, Delaware’s
lawsuit against Mortgage Electronic Registrations Systems Inc.
and Nevada’s lawsuit against Bank of America, according to the
person.

The officials also discussed their concerns about the terms
of the possible foreclosure settlement with the banks and their
frustrations about the lack of information they’re getting about
the negotiations, said one of the other people.

Harris in September called a proposed settlement with the
banks “inadequate” and said California was being asked “to
excuse conduct that has not been adequately investigated.”
Coakley, when she sued the banks, blamed them for failure to
reach a deal, saying they hadn’t offered “meaningful and
enforceable relief” to homeowners for harm they have caused.

One person familiar with the matter said more such meetings
among attorneys general will probably be held.

`Encourage Input'

Iowa Attorney General Tom Miller is leading talks for the
states. Geoff Greenwood, his spokesman, said in an e-mailed
statement that Miller and other representatives of the
negotiating team “encourage input from their colleagues.”

“Through frequent conference calls, they have kept state
attorneys general apprised of developments and have received
helpful feedback and constructive input,” Greenwood said.
“They look forward to continuing to working with their
colleagues as they work hard toward reaching a solid settlement
agreement.”

Over the weekend, the Justice Department contacted four
smaller mortgage servicers, including U.S. Bancorp, PNC
Financial Services Group Inc. and HSBC Finance Corp., with the
goal of including them in any future settlement agreement. The
overture was a first step meant to get reaction from the smaller
banks.

Bank lawyers and regulators with knowledge of that effort
said the smaller institutions remain reluctant to sign on to any
one-size-fits-all deal in part because they don’t have the same
legal exposure as their bigger competitors. The lawyers and
regulators didn’t want to be identified because the talks are
private.

The lawyers also said the smaller servicers have no
incentive to endorse any agreement that hasn’t been completed.